State
statutes authorizing firms to pursue mixtures of profitable and
socially-beneficial goals have proliferated in the past five years. In
this invited response essay, I argue that for one large class of
charitable goals the so-called “social enterprise”
firm is often privately wasteful. While the hybrid form is a bit more
sensible for firms that combine profit with simple, easily monitored social
benefits, existing laws fail to protect stakeholders against
opportunistic conversion of the firm to pure profit-seeking. Given these
failings, I suggest that social enterprise’s
legislative popularity can best be traced to a race to the bottom among
states competing to siphon away federal tax dollars for local
businesses. Not all hybrid forms inevitably are failures, however. For
example, the convertible debt instruments proposed by Brakman Reiser and
Dean -- the inspiration for this response -- offer a promising route
forward for “cold glow” firms wishing to promise to clean up some
easily-measured but harmful business practices.